VMware says it's not concerned about being late to the cloud

VMware CEO Pat Gelsinger AP When VMware released its first hybrid cloud service in 2013, the server virtualization company was considered late to the cloud market.

Amazon had already launched Amazon Web Services in 2006 and Microsoft released its cloud computing service Azure in 2010.

VMware was making billions of dollars by then with a technology called "server virtualization," which creates multiple operating systems on a single computer server. Its software can basically run different versions of Windows and Windows apps, or different types of Linux apps all on a single server.

But as more companies moved their data to the cloud, instead of running it on their own server, VMware saw the need to adapt. It quickly hired experienced managers and started rolling out its own cloud products. And it believes the market is just starting to heat up.

"Five percent of enterprise workloads are running in the cloud. The market in total is embryonic," VMware CEO Pat Gelsinger told Bloomberg.

VMware particularly bet on something called hybrid cloud. Although smaller companies like startups often go all-in with the cloud, many large companies still tend to be skeptical about moving everything away from their own private servers. Hybrid clouds allow companies to use a combination of public and private clouds depending on the level of security concerns they have.

In fact, hybrid cloud seems to be the choice of service for many big companies for now. An analyst firm TechNavio says, nearly half of large organizations are expected to have hybrid cloud deployments by 2017. Hybrid is also forecast to be the fastest growing cloud market this year, according to Technology Business Research.

It's precisely why VMware doubled down on this hybrid approach on Monday, updating its vSphere platform — its core virtualization platform, and the foundation on which its cloud service is built on — for the first time in four years. With the new updates, VMware will basically be able to deliver its hybrid cloud resources on a single, unified platform, without changing the internal network or any of the standard protocols its clients use.

"We can connect and extend people's private clouds through the VMware Cloud Air public cloud and allow them to see this as a literal extension of their private cloud data center," Gelsinger said at a press event.

VMware's strategy has led to increased sales, but profits are being squeezed -- last year, the company reported $886 million on $6.04 billion in revenue, versus $1.02 billion profit on $5.21 billion in sales in 2013. The stock is down about 30% from a recent peak in March 2014, and about flat compared with where it was two years ago. Investors had been pressuring parent company EMC to sell off its stake in VMware last summer, but VMware appointed two new board members early this month, and activist investor Elliot Management backed off.